Toronto Estate Law Blog : Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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Sara Crosbie, a writer with the Globe and Mail, recently published an article on the succession planning crisis looming over Canadian family businesses. In her article, Ms. Crosbie refers to a study completed by Deloitte and Touche, which indicates that two-thirds of Canadian families have no written contingency plans to guide them through a disability or death.

To understand the importance of family businesses to the Canadian economy consider the following study which was completed by Deloitte and Touche and found that “family businesses have 4.7 million full-time employees, 1.3 million part-time workers and sales of around $1.3 trillion.”

Ms. Crosbie states that the lack of succession planning could be attributed to the idea that most parents think, “there's nothing here to pass on”, but the children think, “actually, I'm quite interested in taking it on.” 

Dr. Pramodita Sharma attributes the lack of succession planning to the fact that “money and mortality conversations don’t usually take place until the head of a business is gravely ill. By then, it’s too late to start talking.”

Regardless of the cause, the consensus on resolving this looming crisis is rather simple, communication. Dr. Sharma says “Succession planning is either passing to the next generation of your family, passing to employees … selling it, to be merged or acquired by someone or it could be closing the business down.  That needs preparation, too. You want to get the maximum value out of the business so it has to be a pro-active succession plan. You don't want death to be the succession plan.”

Thank you for reading and have a great day.

Rick Bickhram

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I recently read an article composed by The Children’s Lawyer, Debra Stephens, named Minor Settlements: How to Ensure Court Approval. I found this article to be particularly helpful as the article speaks to the role of The Children’s Lawyer in litigious matters and explains the common issues that arise during settlements involving minors.

Fundamentally, it is important to understand the role of The Children’s Lawyer with respect to their involvement in settlements concerning minors, which Ms. Stephens describes as: “The Children’s Lawyer is not a party to the proceeding and is not in an adversarial role with any of the parties. Rather, The Children’s Lawyer acts as an advisor to the court, making recommendations to assist the judge in determining whether to approve the proposed settlement”.

In her article, Ms. Stephens talks about a few issues that commonly arise during settlements involving minors. One of those issues that Ms. Stephens touches on is legal fees. Ms. Stephens states that legal fees are an important factor in determining whether to approve a settlement on behalf of a minor. Factors that are relied on when considering the reasonableness of a solicitor’s account are set out in the Court of Appeal decision Cohen v. Kealey and Blaney and include:

1.                  time spent;

2.                  legal complexity;

3.                  degree of responsibility assumed by the lawyers;

4.                  monetary value of the matter in issue;

5.                  the importance of the matters to the client;

6.                  degree of skill of the lawyers, results achieved;

7.                  ability of the client to pay; and

8.                  expectation of the client with respect to the fee. 

Also, another factor not mentioned in the case above is ensuring that access to justice is obtained for parties under a disability. I found Ms. Stephens’ article to be particularly useful in my practice and I would certainly recommend it to any practitioner who ordinarily runs into issues involving The Children’s Lawyer.

Thank you for reading.

Rick Bickhram

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As most of us return to our offices from a long weekend, I would like to share with you an interesting case, which I read over the weekend and deals with an Application to declare a family member unworthy to inherit. S.R. (Succession de), 2008 QCCS 4015, is a decision released by the Quebec Superior Court.

In, S.R. (Succession de), the Deceased was survived by his spouse and four children.    The Deceased was a savvy businessman who, during his lifetime, was quite successful. In 1995, the Deceased asked a notary to prepare a Will. A draft Will was sent to the Deceased for his review but it appears that he never executed the Will. In 2000, the Deceased was diagnosed with cancer and subsequently died in 2003.

After the Deceased died, the children looked for their father’s Will in the home and at the Deceased’s office with no success. We are given to understand that all of the children, searched, under the bed, every closet, every brief case belonging to the Deceased, but were unable to recover a Will.   

One of the daughters prepared a proposal requesting the siblings to acknowledge that the Deceased promised to transfer a certain property to her. This would have the effect of increasing her entitlement under the Deceased’s estate. Her siblings refused to sign the acknowledgement, which led to the ensuing dispute. The disgruntled daughter, subsequently informed everyone that she had in fact, located a Will of the Deceased in an old briefcase, which was allegedly in the bedroom closet of the Deceased’s residence.

The discovered Will was similar to the draft Will prepared earlier, except that it included two additional provisions which favoured the disgruntled daughter, in the amount of $2.4 million dollars and was apparently executed by two witnesses from New York. 

The disgruntled daughter tried to probate this Will, but it was contested by her siblings and it was ultimately ruled that the Will could not be probated by the Honourable Justice Gagnon. Justice Gagnon held that there were all the sorts of question marks surrounding the validity and execution of the Will. 

After the Application for probate was refused, the disgruntled daughter then produced a document which was a blank cheque allegedly signed by the Deceased and which purported to give the disgruntled daughter her share in a building that she coveted and various other monies for her home. The siblings refused to admit the authenticity of the blank cheque and commenced proceedings against the disgruntled daughter to have her declared unworthy to inherit under the Deceased’s estate. 

Under the section 621 of the Civil Code of Quebec, it states that a person “may be declared unworthy of inheriting where a person is guilty of cruelty towards the deceased, and where the person has concealed, altered or destroyed in bad faith the Will of the deceased, or a person who has hindered the testator in the writing, amending or revoking of their Will.” 

In relying on this provision, the children advocated that the disgruntled should be precluded from inheriting because she concealed and altered, in bad faith the alleged Will of the Deceased. 

The court held that the disgruntled daughter had likely altered the Deceased’s Will, had taken the draft prepared by the notary and added some typewritten additions that benefited her to the detriment of her siblings and mother. The court further held that the disgruntled daughter likely had taken the blank cheque from the Deceased’s home and also forged that after his death.

Accordingly, the disgruntled daughter was declared unworthy to inherit and her claims against the estate were dismissed.

An interesting point, in Ontario we do not have any similar case law or legislation that would actually allow someone to commence a proceeding, seeking to have someone else precluded from receiving their entitlement absent criminal activity such as murder.

Have a great day,

Rick Bickhram

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I think it’s fair to say that the Internet has severely disrupted the traditional value chains in regards to how we obtain our media content. The value of content, starting with music, movies, TV shows, news and most recently books are being redefined for the Internet age.

I recently read an article published by the BBC News Magazine entitled “Page-turning Passion”, which details the culture of book reading and particularly how we have obtained and received the content from books. 

In the 1640s, books were more than just a tool to obtain information. It was a “treasured personal possession, and object whose loss would be keenly felt. To their privileged owners they were coveted objects, symbols of conspicuous consumption to be displayed alongside paintings, sculpture and silverware”.

Over time, manuscripts were replaced with printed books. Noticeably, printed books lacked that unique quality that gave each manuscript its touch of art. After all, printed books were simply copies produced on the production line. I am a product of the printed book era and have thoroughly enjoyed reading. I reject the idea that some have asserted indicating that printed books are impersonal volumes. As a reader, we find creative ways to make them ours, by underlining and highlighting in these books. I can dog ear pages if I want to.  I can rip out pages.  I can draw pictures in them. 

Now we have entered into a new era, the e-book era. If you have not yet heard of the Kindle, it is Amazon’s wireless reading device. The Kindle also has applications for most smart phones, which makes downloading and reading even more convenient and, unlike the 1640s, the Kindle is simply a tool to obtain information. 

Rush, scuttle and hurry seems to be the ear marks of today’s society. As an urban commuter, rarely do we have the time or the space to pull a book out while crammed onto a subway. Now it is as simple as purchasing a book while on my way to the subway and doing all of the reading off of the smart phone while I am on the subway.

There will always be advocates against the growth and importance of technology, but as an urban resident and a commuter, if it weren't for phone reading, I wouldn't be reading at all.

Thank you for reading,

Rick Bickhram

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The Toronto Star recently reported on Alzheimer’s disease, stating that “cases of the mind-robbing disease will more than double to 1.25 million within 30 years as baby boomers age”. 

With the numbers pointing upward as the population grays, a recent report by the Alzheimer Society, entitled Rising Tide: The Impact of Dementia on Canadian Society suggests the following steps to help reduce the impact of dementia:

1.                  Prevention programs based on healthy diet and physical activity that can delay the onset of dementia by two years, with a potential cost saving of $219 billion over the 30-year period.

2.                  Enhanced skill-building and support programs for family caregivers, many of whom suffer financial hardship because they must leave jobs to look after a relative with dementia.

3.                  Assigning a case manager to each newly diagnosed dementia patient and their caregivers, which could help the person remain at home longer and lessen the strain on the long-term-care system.

Today, annual funding for Alzheimer’s is approximately $24 million. The Toronto Star reports that if “nothing changes, this sharp increase in the number of people living with dementia will mean that by 2038, the total costs associated with dementia will reach $153 billion a year”. 

We have already seen a substantial influx with respect to Will challenges, particularly because there has been a big question mark about the testator’s capacity. The grim realty is that this will be a continuing problem that Estate Solicitors are going to have to tackle.

Thank you for reading.

Rick Bickhram

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As we are in the beginning of a new year, a quote from one of my favourite poets, T.S. Eliot, comes to mind:  “For last year's words belong to last year's language and next year's words await another voice.”  

I recently came across an article entitled "The 8 Life Stages of Estate Planning", authored by G.M. Filisko.  In his article, Mr. Filisko points out the obvious - during our life we will go through different phases and our estate plans should reflect these changes. Mr. Filisko lists the following stages to consider regardless of the phase one may be currently in:

1.      Young, single and carefree
2.      Single, but committed
3.      We’re Engaged
4.      Just Married
5.      The Joys of Parenting
6.      Divorce (if unfortunately applicable)
7.      The Middle Ages
8.      The Golden Years

Regardless of where one may fall in this spectrum, it is never to late to get started.

Since making New Year’s resolutions seems to be the theme around this time of the year, let’s make a resolution to be more organized this year and spend some time considering our estate plans.

Thank you for reading.

Rick Bickhram

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This is our last blog of 2009!

Thank you for reading our blog posts over the past year. We have enjoyed preparing them. We hope that we have been informative.

With the close of 2009, we turn and look to the promises of 2010. While there is no doubt many things are to be considered for the new years, from a family perspective, perhaps this is the year to resolve to consider, or reconsider, whether your family’s legal affairs have been properly planned.

On behalf of everyone at Hull & Hull LLP, I would like to wish you a wonderful new year. We hope that you have a safe, restful holiday. 

Happy New Year.

Rick Bickhram

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Without understanding what the term “social media” is, it can sound intimidating to those in our industry who are not computer literate. But what is social media? Wikipedia defines social media as “media which are formed mainly by the public as a group, in a social way, rather than media produced by journalists, editors and media conglomerates." In an article, composed by Gary Edgar of LawPro, he defines social media as anyone looking to engage, connect and network with others online.

Gary Edgar does point out that one thing social media is not, is a fad.   Social Media is fundamentally changing the ways we interact and communicate with others and it will be interesting to see how this form of media continues to evolve. 

Social networks can be used to learn, exchange ideas and collaborate on projects. I have participated in numerous forums where I have learned how to troubleshoot many problems that I may have encountered with my automobile and computer, moreover, I have also learned neat little tips on some home renovations.  Social Media can also be used as a form of marketing. As Gary Edgar points out in his article, 15-20 years ago, the options for self promotion were limited to newspaper ads, the yellow pages, a radio or TV. Now with the concept of social media, our options have multiplied and the costs for self promotion have been drastically reduced.

However, the social media world is not the flawless paradise that we all would like it to be. There have been instances of online imposters, questions as to how much of my real life persona should I share online, how many people are seeing the things I post and who owns the information that is placed online?  These are all very important questions that will become clearer as this form of media continues to evolve.

Until next time,

Rick Bickhram

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As our year winds down and we prepare for the New Year, we have much to look forward to as our judicial system has undergone a minor facelift to reflect the changes in our society.  One such change has been the implementation of new legislation, The Apology Act (the “Act”), which came into effect on April 23, 2009.

The Act would permit the communications of expressions of sorrow or regret without worrying that the comments can later be used adversely in a civil court. Under the Act, an apology is defined as:

An expression of sympathy or regret, a statement that a person is sorry or any other words or actions indicating contrition or commiseration, whether or not the words or actions admit fault or liability or imply an admission of fault or liability in connection with the matter to which the words or action relate.

Proponents of the Act, suggest that the new legislation will enhance the dispute resolution process, promote accountability and enhance the affordability and speed of justice by shortening or avoiding litigation. The rationale for the implementation of this Act is similar to the rationale for the changes to the Rules of Civil Procedure, which is to make our system accessible, cost effective and efficient.

I agree with the purpose, the idea behind implementing this act, however I question .. has our society become so litigious that we now require the legislature to protect us from apologizing?

Thank you for reading my blog, until next time, 

Rick Bickhram

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The recent decision in Estate of William Lipson (Pattillo, J., December 1, 2009, not yet reported) illustrates an important issue that can arise where multiple wills are executed.

Multiple wills can serve as a valuable estate planning tool for the purposes of saving Estate Administration Tax (probate fees). Simply put, one will deals with assets that require probate in order to be administered. The other will deals with assets that do not require probate: usually shares in a privately held corporation. Probate is only required for the one will, and probate fees are only payable with respect to those assets. As probate is not required for the other will, no probate fees are payable with respect to those assets where probate is not required.

The wills are usually executed at the same time. However, great care must be exercised so that the signing of the second will does not revoke the first.

This was precisely the problem in the matter of Estate of William Lipson. There, draft wills were prepared. Unfortunately, the clause that revokes all prior wills was not properly crafted, and each contained a clause that revoked all prior wills. Therefore, the execution of the second will revoked the first. The possible effect of this was that there was a partial intestacy with respect to all assets dealt with by the first will. The draft wills were executed by the testator prior to a final review.

(There was also a problem with how the two wills identified the assets: both wills purported to deal with all assets other than shares in a private corporation. Therefore there was a potential intestacy with respect to the shares.)

One lesson that can be taken from this decision is that when executing multiple wills, extreme caution must be taken in reviewing the wills and monitoring their execution so that one will does not inadvertently revoke the prior will.

More on this decision tomorrow.

Thanks for reading.

Paul Trudelle

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I conclude my blog week by writing about the late Michael Jackson who was finally laid to rest on September 3, 2009. Ten long weeks after his death, Michael Jackson’s coffin was placed in a mausoleum in the Forest Lawn Memorial Park, which is located outside of Los Angeles.

If reports are to be believed, his body has been placed in the Holly Terrace, which is a large hall at the centre of Forest Lawn's monolithic grounds. Although the fascination of Michael Jackson will continue long after his death, the mausoleum is policed by private guards and is rumoured to be among the highest security resting places in the world.

There have been reports indicating that the price of grave-plots close to Michael Jackson's tomb have gone up $2,000 - $3,000 in value since Michael Jackson joined the neighbourhood.

Some reports have indicated that some private parties have asked for substantially more, with one person rumoured to have asked for $34,000 for a double unit inside of the Michael Jackson mausoleum. Even after death, Michael is still making headlines, this time in the cemetery world.

Thank you for reading and I hope you have an enjoyable weekend!

Rick Bickhram

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Planning your estate feels a lot like preparing for your taxes. It takes time and it’s something the average person hates to turn their mind to. Nevertheless, a solid estate plan is, without a doubt, the best defence against the potential threats to hard earned wealth posed by disgruntled family members or tax authorities.

Recently, I read an article written by Hyman Darling, an Attorney in the State of Massachusetts, in regards to the top 10 issues regarding wills. Mr. Darling states that the top 10 issues that are frequently being considered by the average person are:

1.                  Should I have a Will?

2.                  What kind of Will should I have?

3.                  How does a Will work when I die?

4.                  What if I have a Will but am not satisfied with it?

5.                  Do both spouses need Wills?

6.                  Is it possible to set up a Trust under my Will?

7.                  How can I include a charity in my Will?

8.                  How can a charitable bequest benefit me?

9.                  How much does a Will cost?

10.              How do I go about getting an attorney?

Mr. Darling does an exceptional job at considering each issue and I certainly recommend that everyone considering an estate plan review his article.

Thank you for reading,

Rick Bickhram

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It should come as no surprise that we live in an aging society. As our society continues to grow old, family members should be concerned about their loved ones who live with disabilities.  

I recently read an article (found here) that describes the obstacles that our law enforcement and emergency professionals are confronted with when responding to an emergency involving a disabled or elderly person.

The article describes stories where law enforcement and emergency professionals were not aware or misunderstood the unique limitations of people with disabilities and were unable to offer the best assistance during their need for help. For instance, the article describes “a California man who, while waiting for his bus home from work, was beaten by officers who mistook his folded white cane for a martial arts weapon and a Florida man dumped from his wheelchair by a deputy who didn't believe he was paralyzed.”

The focus of this article should be for family members to be prepared for emergencies. Some helpful tips to becoming prepared are:

1. Instructing family members with disabilities to contact family members right after emergency professionals;

2. Keeping relevant health records in an easily accessible location and instructing family members to give the materials to emergency professionals; and

3. Enlisting your neighbours and nearby friends to offer assistance in emergency situations.

There is no full-proof method of preventing some of the tragedies that the article describes but our family members are the most important people in our lives and we can protect them from traumatic and life-threatening events through careful planning.    

Thank you for reading.

Rick Bickhram

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After a long and relaxing weekend, most of us now return to work geared to face the challenges of our week.  I start my blog by discussing the recent issue of the Probater.

The Probater is a quarterly newsletter that is prepared by the lawyers at Hull & Hull LLP and is provided to the community as an information service.  Our most recent newsletter was released in September 2009.  In the September 2009 issue, Jonathan Morse writes about the fundamental principles behind Rules 74 and 75 of The Rules of Civil Procedure, but more particularly focuses his article on the purpose behind Rule 74.15.

Rule 74.15 allows “any person who appears to have a financial interest in an estate” to obtain orders that would assist them in administering an estate. There is an abundance of case law that defines financial interest and clarifies the threshold question as to who may have a financial interest in an estate.

In his article, Jonathan does a good job in explaining the application of such orders and concludes by referring to a recent decision of the Honourable Justice Brown in Barletta v. Donne, which highlights the recent application of Rule 74.15. 

Thank you for reading,

Rick Bickhram

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In yesterday’s blog, I mentioned that the election of the Ontario Bar Association (OBA), Trusts and Estates Section Executive for the year 2009-2010 was confirmed at the Section’s year end dinner on May 28, 2009. 

Suzana Popovic-Montag is the incoming Chair of the Executive and I happen to be the incoming

Vice-Chair. The balance of the slate is as follows:

Past-Chair:                   Kimberly Whaley

Secretary:                      Ed Esposto

Members-at-Large:     Ann Elise Alexander, Clare Burns, Robert Coates, Vincent De Angelis, Shael Eisen, Jan Goddard, Eric Hoffstein, Danielle Joel, Sean Lawler, Mitchell Leitman, Jane Martin, Deborah Petch, Joanna Ringrose, Liza Sheard, Susan Stamm, Dina Stigas, Sender Tator, Ed Upenieks, Laura West and Melanie Yach.

I look forward to again working on the Executive and having a successful year.

Before turning the page on this past year, though, I would like to sincerely thank Kimberly Whaley for all of her efforts, hard work and counsel as the Chair of the Executive.

Have a nice day.

Craig

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The Ontario Bar Association (OBA), Trusts and Estates Section, year end dinner was held on May 28, 2008 at the Gardiner Museum in Toronto. 

Kimberly Whaley, the Chair of the Section for the past year, brought the past year to a close and the election of the OBA, Trusts and Estates Section Executive for the 2009/2010 year, was confirmed. 

The Section also paid tribute to this year’s recipient of the Award for Excellence in Trusts and Estates, Timothy Youdan.

The Award for Excellence was created to recognize exceptional contributions and achievements by members of the OBA to the area of trusts and estates. The criteria for the award is demonstrated leadership in the trusts and estates bar through knowledge, experience, skill, commitment, passion and strength of character, plus all or some of the following:

·         academic excellence through teaching at the Bar Admission Course, lecturing at a law school, participating in Continuing Legal Education and/or academic writing;

·         participation in the OBA Trusts and Estates Section Executive or the Law Society of Upper Canada on wills, trusts and estate matters; and

·         contribution to the development of wills, trusts and estate law.

In addition to the Award for Excellence, C. David Freedman was presented with the Widdifield Award and Kimberly Whaley with the Hoffstein Book Prize.

Congrats to Tim, David and Kim. The venue, dinner and evening were all quite enjoyable.

Thanks for reading.

Craig

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While the global financial system totters, unemployment soars, government deficits shatter records set during the Cold War era, towns and communities fight for their lives, the global trade system appears threatened, our lifestyle looks to be set for major changes, it is reassuring to know that trust law marches on.

The states of the Great Republic to the South maintain their composure like Cool Hand Luke, calmly assessing the great issues of the day (for trust lawyers) and knocking them down like ducks at a carnival. To wit: Connecticut is set to become the forty-first state to pass a statute for pet trusts (my colleague Megan Connolly blogged on Maryland's pet trust law here).  California made time to pass its own highly evolved Pet Trust Statute last year.  Here’s a link to Pet Trust Law Blog, which has a broad range of resources on Pet Trust Law.

Ontario has yet to divert its attention to such measures.  Estates lawyers would like very much to see legislation making it possible for lawyers to meet their clients' wishes to provide for their beloved Rovers, but it appears that we may have to wait with baited breath.

Have a great day,

Chris Graham

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Being immersed in the world of law, we're constantly confronted with upsetting and often depressing stories.  It feels good to occasionally resurface to hear about a positive story.  

In the London Evening Standard, David Cohen writes about the new queen of Soho, a 23 year old, named Fawn James.  For those of you who are not familiar with the area, Soho is located in the centre of the West End of London, England, in the City of Westminster.  

Fawn James inherited £75 million from her grandfather Paul Raymond, who was well known as Soho's property tycoon.  Paul died approximately one year ago.

In his article, Fawn James is described in a manner that we can all relate to at some point in our life, a student living on a budget.  One year later, Fawn is £75 million richer and both her and her family now controls 60 of Soho's 87 acres.

In her first interview since inheriting her grandfather's treasure chest Fawn says that her "first mission will be to make Soho greener.  We're looking at retrofitting our entire stock of buildings to make them more environmentally friendly".   She's also committed to her community, "I think it's important to support charities operating Soho and in the coming months I'll be assessing which one we want to assist."  As she reflects back on her time with her grandfather her only concern now is "to make him proud".  

Thank you for reading,


Rick Bickhram

 

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An article published in The Columbus Dispatch, an Ohio publication, shows us how vulnerable seniors can be to fraud through the purchase of financial products that are technically legal but not in their best interest.

An 83 year-old woman had her life savings placed in an annuity but was subsequently solicited to cash in her existing policy and buy a new one. The 83 year-old suffered from partial blindness as a result of diabetes, dementia and she had recently moved into a nursing home. After being convinced to purchase a new annuity, the woman died two weeks later. She received one monthly payment of $1,500 before she died. 

The beneficiaries of her estate received half of what they thought they should have from the new annuity and sought to recover from the investment company. The arbitration panel of the Financial Industry Regulatory Authority sided with the deceased’s estate and awarded the beneficiaries of her estate compensatory damages.

The article states that this is not an uncommon practice. In January 2008, the Financial Industry Regulatory Authority fined the broker $225,000 for “making unsuitable sales of deferred variable annuities to 23 customers”. 

Annuities can be great investments, but BUYER BEWARE. If there are questions about the age and health of the potential purchaser, it may not be in their best interest to purchase the annuity.

Thank you for reading,

Rick Bickhram

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I recently stumbled on an article by Eileen AJ Connelly, where she discusses the issues that might arise with aging relatives or friends. I found Ms. Connelly’s article to be interesting because Canada is an aging society, but more particularly because it provides her readers with a strategy on how to approach the subject of managing finances with an elderly relative and what signs to watch for if it is suspected that an elderly relative might be having trouble handling finances.

In her article, Ms. Connelly lists the following “warning signs” to watch for if you suspect an elderly relative, client or friend may be having trouble handling finances:

1.                  Unopened mail;

2.                  Late or unpaid bills; collections actions;

3.                  Confusion or lack of interest about what bills have been paid;

4.                  Bounced checks;

5.                  Disorganized personal paperwork;

6.                  Uncashed cheques or unclaimed property reverting to the government;

7.                  A large number of magazine subscriptions; and

8.                  Unusual or increasing direct mail or shopping-channel purchases.

The theme behind Ms. Connelly’s article is not to wait to get involved, but be proactive. If you have noticed a possible problem with an elderly relative or friend you should not wait to have the dreaded conversation of managing finances. The longer you wait, the greater the risk that any existing problems will only accumulate. Ms. Connelly states that most elderly relatives, like parents, are afraid that they are bothering their children and it’s up to the children not to assume that your offer for help will be refused.

Thank you for reading and have a great weekend.

Rick Bickhram

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I recently learned that an old neighbour of mine was residing in a long-term care facility and I decided to visit him.  As a child, I remember my neighbour would often come out to join us in a pick up game of baseball or street-hockey.  Having known my neighbour to be a strong and vibrant individual, and despite having prepared myself, it was nonetheless disarming for me to see him in need of assistance and so dependent on others. Although, in my practice, I have cause to consider the issue of capacity almost daily, this experience caused me to reflect on the issue in a much more personal fashion.

Lawyers, particularly in our area of practice, are often required to consider capacity issues and it is easy to allow our personal views to affect our analysis.   For instance, if my neighbour left his entire estate equally among his three children, in most circumstances we would presume he had capacity.  However, if he left his estate to his caregiver, to the exclusion of his children, most of us would be inclined to conclude that he had either acted for want of capacity or was perhaps coerced to make a Will while vulnerable to undue influence.  

People do not typically become incapacitated overnight, except in circumstances where a catastrophic event has occurred.   Capacity to make a Will has been described as knowing and understanding the nature and effect of your dispositions and understanding who would be the natural persons to enjoy the bounty of their estate.

In making this determination, if there is any doubt regarding a client's capacity it is surely advisable to obtain the appropriate capacity assessment in the circumstances.

Have a great week! 

Rick Bickhram

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The 11^th Annual Estates and Trusts Summit was held in Toronto on November 19 and 20, 2008. This excellent program featured a number of experienced practitioners speaking on a broad array of estates and trusts topics.

Topics (and speakers) included:

• Family Law Update (Karon Bales)
• Shareholder Issues – The Family Business in Succession Planning (Frank Archibald)
• Dealing with Insolvent and Bankrupt Estates (Barry Corbin and Robert Klotz)
• The Non-Resident Factor in Estate Planning (Mary Anne Bueschkens and M. Elena Hoffstein)
• Update on the Trust and Estate Provisions in the Protocol to the Canada/U.S. Income Tax Treaty (Beth Webel and Jim Yager)
• New Strategies for Post-Mortem Tax Planning – The Eligible Dividend Rules and More (Heather Evans)
• Powers of Attorney and the Duty to Account – An Update (Liza Sheard)
• Powers of Appointment (Timothy Youdan)
• The Will is Not the Whole Picture - Integrating the Transfer of Wealth both Inside and Outside the Estate (Wendy Templeton)
• New Developments in Insurance and Estate Planning (Graham Carter)
• Update on Practice Directions for the Estates List (The Honourable Mr. Justice David M. Brown)
• Capacity and Other Issues in Power of Attorney and Guardianship Disputes (Jan Goddard)
• A Clinician’s Perspective on Assessing Testamentary Capacity and Related Capacities (Dr. Kenneth Shulman)
• Capacity Issues – The Perspective of the Hospital, Retirement Home and Group Home (Wendy Griesdorf)
• The Vulnerability of Pre-Death Gifts (Eric Hoffstein)
• The Scope of the Attorney’s Powers (Sender Tator)
• The Incapable Minor Turning 18 (Clare Burns)
• Remarks from the New Children’s Lawyer for the Province of Ontario (Debra Stephens)
• Marshalling the Evidence For and Against Capacity in a Will Challenge (Hilary Laidlaw)
• Short Circuiting the Frivolous Will Challenge (Hull and Hull’s Craig Vander Zee)
• Mediation of Capacity Issues – The Mediator’s Perspective (Felice Kirsh and Archie Rabinowitz)

If you were not able to attend, the seminar materials will be available from the Law Society of Upper Canada.

Thank you for reading,

Paul Trudelle

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I recently read an article regarding the most common claims against lawyers, which is authored by Dan Pinnington who is the director of practicePro, LawPro’s risk and practice management program (click here for the article). I found it particularly interesting that only a small portion of LawPro claims account for a lawyer’s inability to know or apply the substantive law.    

The most common claim involves communication between lawyer and client. Dan breaks down the type of communication errors into three categories. According to the article, the most common communication related error, is the failure to follow the client’s instructions.  The second type of communication error is the lawyer doing work or taking steps on a matter, but failing to obtain the client’s consent or to inform the client. The third type of communication error involves the failure to explain to the client simple administrative things (i.e. timing of steps on the matter, fees and disbursement). Dan states that you can reduce your exposure to this type of claim by managing your client’s expectations from the very start of the matter and actively communicating with the client at all stages of the matter. 

The second most common claim is missed deadlines and time management related errors. The most common time-related error is a failure to know or to ascertain a deadline (i.e. limitation period). There is a concern that procrastination-related errors are on an upwards trend. Dan states that these types of errors are easily preventable with better time management skills and the proper use of tickler systems.

The third most common error is the inadequate investigation or discovery of facts.   To avoid these types of claims lawyers have to “dig deeper”, take the time to read between the lines so that all of the appropriate issues and concerns associated with the subject matter can be identified. 

I hope my final blog will assist all of us in our practise. 

Rick Bickhram   

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Upon the death of a person, a duty arises to bury or otherwise dispose of the remains in a decent and dignified fashion.  But who does this duty fall upon?  

It is well established in the jurisprudence for Ontario that plans for the service and burial arrangements are the responsibility of the estate trustee.  This responsibility can conflict with the wishes and expectations of the deceased and family members, particularly in a religious context.

In Saleh v. Reichert, the deceased was of the Muslim faith.  Her husband had converted to the Muslim faith for the purpose of there marriage.  There was evidence indicating that the deceased expressed her wish to be cremated upon her death.  The deceased's husband was appointed as the estate trustee without a will and intended to honour the deceased's wishes.  The deceased's father objected to the cremation on religious grounds.

The court affirmed the fundamental duty of an estate trustee is to ensure that the remains of a body be disposed of in a decent and dignified fashion.  The court held that religious law has no bearing on the case.   In Ontario, burial and cremation are both means that would meet the requirement for disposal in a decent and dignified fashion.  The deceased's father's action was dismissed.  

It is important to note that it was acknowledged that there is no property in a body.  Therefore, any instructions left by the deceased, whether in a Will or otherwise are only precatory and are not binding on the estate trustee.

Rick Bickhram

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I recently attended a breakfast seminar hosted by Hull & Hull LLP, where I listened to my colleague, Natalia Angelini, speak about a testator's capacity to give instructions for the preparation of a Will.   
 
During Natalia's discussion, she spoke about the varying levels of capacity for different transactions.  Natalia also touched on the traditional grounds that a Will could be challenged.   I was particularly intrigued to learn that the circumstances surrounding the failure of a testator to make a will could be advanced as forming the basis for a will challenge.  

One of the traditional grounds for a will challenge is undue influence.  At its very basic form, undue influence occurs as a result of pressure brought to bear on the testator in giving instructions and executing the testamentary document.  The pressure brought on the testator, must be of such a degree that the testator has reached the point of thinking, "It is not my wish, but I must do it".

In contrast, "reverse" undue influence (as it has been called) occurs where a testator is being prevented from signing a Will.

As this interesting topic continues to evolve, I am confident that the estate & trust bar will be looking on with interest.

Rick Bickhram

 

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You may remember that my colleague, Chris Graham, blogged on the death of the actor, Heath Ledger and the pending litigation involving his estate (Link to Chris Graham's Blog).    

It has been well reported that Ledger last made a Will in 2003, before the birth of his daughter Matilda (in 2005) and before his claim to fame.  Under the 2003 Will, Ledger left all of his possessions to his parents and sister.  He subsequently stared in several hit films which vastly increased the size of his net value.  Subsequent to his passing, the question that was considered was what would happen to Matilda, as she was not provided for in the 2003 Will?   

There had been discussion that Matilda's mother would likely commence a claim on Ledger's estate, which could have tied up the Estate in litigation for years. However, now it is widely reported that Ledger's entire estate will all go to two year old Matilda (click here for the report).  

Estate planning is like doing our taxes.  No one wants to do them, but Ledger's story teaches us an important lesson.  It reminds us of the uncertainty of death and the consequential need to ensure that our estate plans are updated to protect those that we care for.  

Rick Bickhram

 

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Today’s blog is a continuation of my blogs this week on the variation of a trust under the Variation of Trusts Act and will focus on the Deed of Arrangement. 

The approach to, and content of, the Deed of Arrangement will most certainly depend on the circumstances involved. The approach to the Deed of Arrangement may be quite different if the variation arises as a result of an ongoing proceeding (and has been negotiated as part of that proceeding conditional on Court approval) than if it does not.
 

A Deed of Arrangement typically names and is signed by all capacitated beneficiaries. These beneficiaries are usually identified and grouped according to their interest in the trust. The trustee is also usually identified and is a signatory of the Deed of Arrangement as the trustee consents to act under the varied trust. Incapacitated beneficiaries are not typically named as parties to the Deed of Arrangement as the Court is approving the variation on their behalf.

A Deed of Arrangement may (depending on the provision and as necessary) also contain (the following are not meant to be exhaustive) (i) recitals which provide background on the trust, the parties, trustee, potential beneficiaries and provisions of the trust including, as necessary, the term in the trust that is being varied, (ii) a paragraph that the Deed of Arrangement is subject to Court approval on behalf of the incapacitated beneficiary(ies), (iii) paragraphs setting out the variation, with the paragraph number of where the paragraph fits into the trust and indicating how the paragraph fits into the trust, (iv) paragraphs addressing, if applicable, any action that is required as part of the variation, (v) a paragraph allowing for the Deed of Arrangement to be signed in counterpart if there are numerous parties, (vi) a paragraph addressing the payment of the costs of the preparation of the Deed of Arrangement and the Application, and (vii) a paragraph addressing the legal advice obtained.

Thanks for reading, Craig
 

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Here’s a story from Calgary that will make every lawyer tremble documenting the conviction of a mother of three, and assistant at a law firm, for misappropriating $1.4 million from the firm’s trust account.

A great reminder of the need to restrict access to a trust account and exercise vigilance in who can access it. Of course, in the hustle and bustle of practice it is possible for these types of basics to fall to the background as we try to satisfy clients with the outcomes of their cases.

Most lawyers I know operate on the assumption that everything which leaves their office, including trust cheques, is their responsibility. Since not everything in every case can always be reviewed, that implies a certain amount of trust towards assistants, clerks, and other support staff. It also implies that it is very wise to know the people that work for you, and consciously keep up with them from time to time.

Nothing will protect from every rogue of course, but you never know what you might find out by staying on top of things…

Thanks for reading.

Sean Graham

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Listen to Deductions from Compensation.

This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

Deductions from Compensation - Hull on Estate and Succession Planning Podcast #125

Posted on August 12, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #125 of our podcast on Tuesday, August 12^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Suzana Popovic-Montag: Hi there, Ian.

Ian Hull:  Hi, Suzana. How are you doing?

Suzana Popovic-Montag: I’m good thank you, how are you?

Ian Hull: Just great. We’re having some fun with this whole question of accounting, and I think I’ve done the numbers, and I think we’re almost done. But before we go through our podcast today, let’s remind everyone, please feel free to call in on our call-in number and our call-in number is of course, 206-457-1985.

Suzana Popovic-Montag: Or send us an e-mail at hullandhull@gmail.com or of course, you can visit our blog at estatelaw.hullandhull.com as well. 

Ian Hull: So before we launch into the substantive podcast today, I just wanted to do a couple of things. One, I want to deal with an e-mail that came in and another is I want to just welcome people to listen and look at the, last week we enjoyed Jordan Atin who is our associate counsel here, our Senior Associate Counsel, and he was on Canada AM for four days in a row talking about family feuds and the link to the webpage where CTV is still running the streaming is worth looking at, and we’ll make sure that’s in our show notes.  But Jordan had a great opportunity to talk about family feuds and sort of the issues that arise out of his book, “The Family War” which is co-written by Les Kotzer and of course, my good friend, Barry Fish.

Alright, so we were talking about some of the e-mails. And we had two e-mails last week come in. Both of them were semi-related and so I’m sort of going to merge the two of them together. And the question really comes down to this:  What are we talking about with The Shoebox Effect? And what we’ve been mentioning in the past and what we’re going to talk a little bit about today, because part of our wind-up is the importance of vouchers, is The Shoebox Effect is this. When you are a trustee, no matter what you think, no matter what you do, you will be someday possibly asked to show your receipts and that’s all I’m saying The Shoebox Effect is. Make sure you keep receipts, even if it’s in a shoebox. Your lawyer or your accountant can work on the presentation of it when you ultimately have to go to Court, but keep the receipts. So that was the two questions that came in, actually, both were from different parts of Canada but asking about the same question. So I’m not going to dwell on it other than that and say that when we’re winding up our comments on accounting, please, please, please keep your receipts if you’re a fiduciary.

Suzana Popovic-Montag: And just to add one thought to that, Ian, I would also suggest that it’s really helpful to make sure that you document as much as possible everything that you do as a trustee.  And when it comes to exercising your discretion, and if particularly the Will or the trust document allows you to have a broad discretion, to write down your thoughts or your reasoning or the underlying reasons that you decided to do something or not do something and include that in the shoebox that you end up bringing to a lawyer one day possibly.

Ian Hull: That’s a great suggestion and it comes down to, when we’re talking about getting paid for all of these efforts, the deductions from compensation that we briefly talked about in the last podcasts, what can you look to? So we talked about that you can get paid, say approximately 5% as a tariff, so to speak.  And we’ve talked about some of the things we’re going to knock you out from, but one of the easy deductions is the delineation between the executor’s work and lawyer’s work or accountant’s work. And that ties into your comment, Suzana, on docketing, keeping records beyond just the receipts that I talked about.

Suzana Popovic-Montag: And things for instance, like the preparation of tax returns, when fees are associated with that, depending on who’s preparing the tax returns and how much those fees are, that’s another thing that might possibly be a deduction from compensation if the trustee for instance is an accountant. And these are situations where a trustee is an accountant or a lawyer that you see most often, where these issues can arise.

Ian Hull: Alright, so another concern that we raise and probably the last deduction from compensation we’ll just mention now, is this whole idea of pre-taking compensation. Under Ontario legislation, if you’re a fiduciary or, as I say, a guardian under the Substitute Decisions Act, they actually allow you to pre-take your compensation, take before you’ve made your efforts. But we’ve talked about in the past the cases, and we’ve talked about them in the show notes as well, the case law that talks about Re: Knoch which we talked about in our previous podcast and others, and we want to be very, very careful about pre-taking, getting paid before you’ve done your work. So that’s an easy deduction.

Suzana Popovic-Montag: Ian, just a question that I find often gets asked is whether or not GST is actually payable on executor’s compensation. What are your thoughts about that?

Ian Hull: Well, that’s a great question and it’s a murky area of the law.  And what has happened in the past is you would typically have to look at it case by case. First and foremost, you have to look at the amount of the payment that the compensation is. If it is over $30,000 that you’re being paid in compensation, which could be the case because it’s typically a one-time payment, you may have to pay GST on that income as having rendered services. So it’s really case-by-case. Talk to your accountant, get good advice before you wrap up that issue, but that’s an excellent question and a really important heads-up for people who are accounting and doing compensation work.

Okay, I think we’ve pretty well covered off our accounting in the in-depth form and so we wanted to make sure that we stayed the course and came full circle to our sort of checklist that we’re trying to work through. And one of the things I will say is we’re hopefully going to be changing our format and trying to pick up a video feed for our podcasts which is in the process. Some technology glitches haven’t allowed for it to fall in just yet, but we’re going to be moving into some different topic areas. But one of the topic areas that we have to, I think, just sort of at least wrap up in a minimum way, is the process itself. We’ve talked about the passing of accounts process but let’s talk about the physical steps that are taken because many people don’t understand passing of accounts and what you can expect in the courtroom once we’ve got the Court format accounts.  And my introduction to this, by way of the fact that we’re going to be moving this into an audio, is that we’re going to have our own mini-series on this issue, where we’re really going to flush out these topics.  But I think its worthwhile talking about them briefly now, so that people understand what they’re going to get themselves into once they’ve got these beautifully created Court format accounts.

Suzana Popovic-Montag: And procedurally speaking, certainly here in Ontario, the Rules of Civil Procedure will govern what is included in an Application to pass the Court format accounts. And we started when, before we got into this discussion of how we would audit estate accounts or how to prepare a best kind of set of accounts in the circumstances, we talked about the fact that it’s all part of an application process.  And so there will be an actual Court date that’s assigned to the hearing for the return of the executor’s accounts, and you’ll serve a Notice of that application on all the beneficiaries together with, in many circumstances and many situations, a copy of the accounts as well. And the Rules themselves specifically provide what has to be in this Application record and I thought, Ian, it might be good to just sort of flush out some of those specific requirements.

Ian Hull: Alright. Well I think and it’s helpful because it’s not quite as daunting when you get the document itself thrown at you because, as I say, a lot of these accounts are passed in a non-contentious environment.  But it’s legal mumbo-jumbo to some people so you want to make sure you sort of know what you’re getting yourselves into when you get it. And the main document behind the accounts is the Affidavit verifying the accounts, they’re proving that you’re swearing to the truth of the accounts, and that’s the fiduciary sort of statement that says these accounts are true and accurate.

Suzana Popovic-Montag: And that Affidavit, as I say, is included in the record that is served upon everyone who has a financial interest in the estate. And financial interest in the estate I think we’ve talked about on previous podcasts, has a very broad meaning in the sense that even people with a contingent interest in an estate will be served with the accounts as well.

Ian Hull: And talking about service, we don’t want to forget that there may be government agencies that we have to serve, of course; the Office of the Children’s Lawyer should there be any minor child’s interests, or interests of those who are unborn and unascertained.  And without getting too technical about it, we just want to look at the trust document or the Will and see if there is a trust. And typically if there’s a trust, more often than not, almost certainly in fact, the Children’s Lawyer would be served, that’s the Office of the Children’s Lawyer.  And it’s different in each Ontario jurisdiction, but basically the lawyer in charge of minor interests. Another person to be concerned about serving is

Suzana Popovic-Montag: the Public Guardian and Trustee. That office would be served on behalf of any incapable beneficiaries of the estate. And so just like the Children’s Lawyer protects the minor, the unborn or the unascertained, the Public Guardian and Trustee here in Ontario will represent those incapable beneficiaries.

Ian Hull: So those are just things to keep a heads-up on so that you don’t get out of the box and miss a page of the application process by not putting important entities on notice. Obviously, we come back to our cardinal rule: Read the document, read the Will, read the trust and make sure you’ve served everyone named in that, but the Public Guardian and Trustee and the Office of the Children’s Lawyer, are two entities that aren’t necessarily named and quite often aren’t named, so just a heads-up. 

So I think that gives you sort of a sense of what the document itself, in a friendly environment will be, so I think we’ll wrap up today’s podcast and again reminding you, please feel free to e-mail at hullandhull, h u l l a n d h u l l @gmail.com.

Suzana Popovic-Montag: Or feel free to call and leave us an audio comment at 206-457-1985. Thanks very much, Ian.

Ian Hull: Thanks, Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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As I am sipping on my coffee this morning, I am thinking to myself, who can commence a will challenge? 

A will challenge can be commenced pursuant to 75.06(1) of the Rules of Civil Procedure. Rule 75.06(1) is a procedural remedy that permits any person who appears to have a financial interest in an estate to apply for directions or move for directions in another proceeding.   This begs the question, who is considered to have a financial interest in an estate? This issue was addressed in the Ontario Superior Court (Divisional Court) decision of Smith v. Vance.

In Smith, the Deceased died on October 27, 1995, leaving a will dated January 5, 1994 which named the applicants as the estate trustees.   A notice of objection was filed by three individuals who were cousins of the deceased through marriage. The objection was subsequently struck by the Honourable Justice Perras during the motion for directions on the grounds that the objectors did not have a financial interest in the subject-Estate. In this hearing, the objectors appealed this decision.

The objectors asserted their financial interest in the Estate based on their close relationship with and their physical and financial assistance for the deceased. There was also an earlier destroyed will in which the objectors were named beneficiaries. Finally a letter was allegedly written by the deceased wherein she acknowledged that the objector will have an interest in her estate.

The court acknowledged that a financial interest is not defined in the Rules of Civil Procedure. In such cases, words should be taken by its natural meaning. Black's legal dictionary defines financial interest as an interest equated with money or its equivalent. The court held that claimants must do more than simply assert an interest. They must present sufficient evidence of a genuine interest and meet a threshold test to justify inclusion as a party. The interest need not be conclusive evidence at that stage but must be evidence capable of supporting an inference that the claim is one that should be heard. 

If the evidence offered by an objector is capable of supporting an inference that the claim raises a genuine issue, and thus is one that should be heard, the objector is entitled to standing and should be granted permission to be added as a party. The appeal was allowed and the order by the Honourable Justice Perras was set aside.

I hope you had fun reading today's blog. Until tomorrow,

Rick Bickhram

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This week on Hull on Estates and Succession Planning, Ian and Suzana discuss the question of compensation and complaints regarding compensation.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

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Issues in Estate Administration: Tax Filing - Hull on Estate and Succession Planning Podcast #110

Posted on April 29^th, 2008 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #110 of our podcast on Tuesday, April 29^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by

Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada.  Here are Ian and Suzana.

Suzana Popovic-Montag: Hi it’s Suzana Popovic-Montag.

Ian Hull: Ian Hull.

Suzana Popovic-Montag: And welcome to our podcast. We would just like to take this opportunity at the very beginning to remind you of the fact that we have a call in number for any of our listeners who have any comments on our podcast. Please feel free to call us at 206-457-1985.

Ian Hull: And also I encourage you to send us an e-mail at hullandhull@gmail.com or check out or daily blog which is easily found from our webpage at hullandhull.com.  Well let’s start working through some issues on the estate administration.

Suzana Popovic-Montag: That’s great Ian, we shall, but I just wanted to take a quick opportunity to let our listeners know that by the time this podcast is up, you will have done yet another appearance on a great show that’s called “Strictly Legal”, that is hosted by Michael Cochrane and for people who are interested in hearing Ian speak about issues of Estate and Trust matters in a more general all encompassing fashion, I highly recommend you to that show.

Ian Hull: Well thanks Suzana, its fun, it’s a great show. I’m looking forward to it. It’s thrown up on a video stream after on Business News Network, BNN Network so, it’s good fun.

Suzana Popovic-Montag: Good for you Ian.

Ian Hull: Alright, so where we left off in our last podcast was we were still struggling through some tax stuff because it is tax time here in Canada.  So we get a little focused on that and the easiest, I find, with files, the easiest criticism of any executor administering an estate is that they botched the tax filings or did any of the tax related stuff and so let’s talk a little bit about that.  But also let’s talk about the fact that, you know, again, if you’re not the expert in the tax side of things, get help.

Suzana Popovic-Montag: That’s for sure.

Ian Hull: So we mentioned the T1 terminal income tax return which is due and then we talked a little about how you dovetail in an interim distribution encouraging the party, the executors, I try to encourage my client, the executors. to get the money flowing as quickly as possible, knowing the restrictions that are out there, because there are some, we can’t just simply send it out.  But as soon as is safe, send it out with sufficient holdback. One of the reasons for the holdback is, of course, we have to pay taxes.

Suzana Popovic-Montag: And in addition to the T1 terminal return an estate trustee is going to prepare annually a T3 estate tax return.

Ian Hull: And that’s on estates that are not immediately distributable, so that if the assets are generating income, or there is a trust that is ongoing, or you just didn’t get it filed, the estate administered in the first year, Revenue Canada still wants their tax money on those, on the interest income or the growth and so forth.  So our annual T3 estate return needs to be filed, and that is approximately, again you can expect a Notice of Assessment  approximately six to nine months after that.

Suzana Popovic-Montag: One of the other things that we suggest to our clients to keep in mind after these tax returns have been taken care of, is to consider and to confirm that all CPP death benefits, that’s the Canada Pension Plan death benefits, have in fact been received on behalf of the estate.

Ian Hull: And also here in Ontario, we are forced to consider the issue of additional estate administration tax being paid.  And on this point, I was in Court the other day, not a case that I was involved with, but I was watching and I noticed that there was some argument between the government of Ontario and a big, it looked like a big estate, I didn’t follow all the details, but they were arguing over a refund.  The estate had, in fact, filed, and it turned out they had overpaid, they just basically overestimated the value of a big, big property, paid tax on it, the administration tax on it and then were now going back to the Court to work out a mechanism to get a repayment.  So, as is in life, possession is nine- tenths of the law. It reminded me of the adage that, you know, its always better to be conservative when you are making the filings, on the estate administration tax side because it can be more difficult  to get the money back than it can be to pay the money.  But obviously always being honest throughout the process.

Suzana Popovic-Montag: That’s good advice, Ian.

Ian Hull: I think really at this point, I just want to take a deep breath and look back at what we are doing because, and this is where some clients, we meet some resistance from clients because they sort of see us as trying to cover off too much sometimes. But I really, I often at this point will sit down and prepare a comprehensive reporting letter.  From our standpoint, for sure, we will report throughout.  But this is a good time also for the beneficiaries to receive something in writing directly from the executor.  There is nothing like personal contact, ongoing phone calls is a great idea as well.  Just keeping people up to date, keeping the process personal.  Because this is personal, this isn’t a business transaction, this is a life transaction.  So I always encourage my clients who are executors to pick up the phone or grab a coffee with some of the beneficiaries or even have an informal meeting with them at the local coffee shop.  But most importantly, I also suggest to them that they prepare a reporting letter.

Suzana Popovic-Montag: That is really good advice, Ian because it gives people then an opportunity to sort of see in writing all the hard work that you have done as an executor and the benefit of that, of course, being at the end of the day, when you want to seek compensation for your work as an estate trustee, you will have something to point the beneficiaries to in terms of the work and the hard effort that you have put forward in administering the estate.

Ian Hull: And it really is, it is not just self-serving, I think it is a natural reaction for people to, who feel that they are in the dark, no matter what you are dealing with, in business or, and in this case what is often a family situation.  Dialogue and communication is so crucial and so the more, the better.

Suzana Popovic-Montag: And then just sort of to wrap up the tax discussion that we had we want to turn our minds to the final income tax return and the preparation of that final T3, and then, of course, applying for the final Clearance Certificate in order to give the sort of seal of approval to all the tax filings that have been done to the estate trustee on behalf of the estate.

Ian Hull: Okay, so let’s talk this through a little bit because this is really the final bell for the tax filings, and this final T3 return and the final Clearance Certificate application is so important. Again, I typically will tell my clients unless they are the tax experts that I am not, make sure you send everything to the accountant.  This is the last chance to have sent all of the paper that you think might possibly relate to any of the assets of the estate to the accountant, let them decide what needs to be put to the taxing authority, not you.

Suzana Popovic-Montag: And then, of course, file the return, pay any taxes owing and just make note of the fact that you want to follow up the actual receipt of the Notice of Assessment for that final T3 return and typically that will come in about six to nine months.

Ian Hull: And then, of course, we have the second step and that is, of course, we will be looking for a Clearance Certificate.  But one of the things that people talk about, and without getting overly technical on the tax side, is what do you do when you want to wind up an estate because interest is always going to be accumulating?  And there is an easy answer, again not for my abilities to follow through on the mechanics, but the concept that: say there is a $100,000 left in the bank and you are holding that back to get your Clearance Certificate from CRA.  You filed your final T3 return, everything is really ready to go but there is this one remaining amount of money that is being held back because the accountant said look, you know what, this is a busy account and this individual did a lot of transactions over his lifetime and CRA could always come back and look, and that final look at the Clearance Certificate time, because we have to remember CRA, that’s the last kick they are going to get at it too.  So they typically take a pretty good, careful look at all of the tax activity of the deceased at that time.  But what you can do is, you can allocate the interest income that is being accumulated on the stop date.  So you, say you have some money left, you want to stop the estate, basically stop the clock running, so that you can indeed say it is over to Revenue Canada.  The go forward income accumulation just gets allocated to the beneficiaries.  And as I say, there are certain forms that get filed with the Revenue Canada and so forth to make that happen.  But it is an important step to allow you to bring close to the ongoing treadmill of interest income that is going to be coming in on the money you are holding.

Suzana Popovic-Montag: And that is a really good point to address in the letter that you write to the beneficiaries reporting on the administration of the estate and reminding them that at that point, that stop clock date or whatever you want to call it, at that point forward they have an annual obligation to themselves report that income and pay tax on it.

Ian Hull: And so now we are looking for that Clearance Certificate.  And even if that, as I say, the final distribution hasn’t been made, so you write a letter to CRA, you wait typically, it’s difficult to guess, it might be six to nine months, it might be more depending on the circumstances.  And once you receive that final Clearance Certificate you can send out your final distribution. 

Now one little twist, just as a final comment on the tax side is, is that you want also, I remind my clients to look at whether or not the deceased was a G.S.T. participant or registrant, because there can be special filings that need to be undertaken for that, and make sure that that’s been closed.  So your loop is closed fully on the tax side, you’ve diarized them and then in our next podcast, we are going to talk a little bit about the accounting obligations, not from the standpoint of the government, which we have gone through, it’s going to be hopefully no more tax time once we get in our next podcast, we are going to move into the accounting obligation as between the executor and the beneficiaries.

Suzana Popovic-Montag:  Well that is great, Ian.  Thanks very much.  I look forward to our next podcast.  And just a reminder again for anyone who has any comments about our podcast, please feel free to call us at 206-457-1985 or send us an e-mail at hullandhull@gmail.com or, of course, visit our blog and our webpage at estatelaw.hullandhull.com.

Ian Hull: Thanks Suzana.

Suzana Popovic-Montag: Thanks Ian.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Alter Ego Trusts - Hull on Estates Podcast #107

Posted on April 22^nd, 2008 by Hull & Hull LLP

Natalia Angelini: Hello and welcome to Hull on Estates. You’re listening to Episode #107 on Tuesday, April 22^nd, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

Natalia Angelini: Hi and welcome to another episode of Hull on Estates. I’m Natalia Angelini.

Chris Graham: And I’m Chris Graham.

Natalia Angelini: So Chris, welcome today. We’ve never podcasted before although it feels like we have.

Chris Graham: Many times Natalia, but I’m sure it will be a pleasure.

Natalia Angelini: Yes I think it will and today we’re talking about a subject that is quite interesting. We’re going to cover the issue of alter ego trusts. Now alter ego trusts are a newer instrument and it’s a type of trust that satisfies certain requirements under the Income Tax Act and which are defined in Section 248 of the Income Tax Act. So perhaps I’ll just start by setting out some of the requirements for an alter ego trust. Chris, you can feel free to jump in any time here.

So this is the kind of trust that is really appropriate for an older person because the settlor has to be at least 65 years of age at the time the trust was created. And the trust must have been created after 1999.  So it is, as I said, a newer type of trust instrument. The settlor also has to be able to receive all of the income of the trust that arises before his or her death and no one except the settlor may, before his or her death, receive or obtain the use of any income or capital of the trust. And I think finally the trust does not make an election referred to in the Income Tax Act and that’s, for anyone who’s interested, that’s in sub-paragraph 104, sub 4a, sub 2.1 of the Income Tax Act.

Chris Graham: That was a mouthful.

Natalia Angelini: That was a mouthful, I’m sure we’ll all be rushing to go look up the Section.

Chris Graham: Applies to pretty much any reference to the Income Tax Act.

Natalia Angelini: Exactly. So those are the requirements for an alter ego trust to exist and perhaps we can chit chat about some of its other elements.

Chris Graham: Yeah, I guess the first element that any lawyer will know, but people should also be aware of, is that a trust, including an alter ego trust, is a separate tax payer. For the purposes of paying taxes, it is its own person.

Natalia Angelini: That’s right Chris, good point. What else makes the alter ego trust distinct?

Chris Graham: Well, the rule against perpetuities which non-lawyers call the 21 year rule, some lawyers do too, of course, better than me, does not apply to deferral of capital gains tax until the settlor dies or until the capital property is disposed of during the settlor’s lifetime. So basically, if the settlor lives past age – say they create the trust at 65 and they live past age 86 which a lot of people are these days, well the rule against perpetuities in other trusts might kick in. It doesn’t kick in to the alter ego trust.

Okay, so in short, what happens is that on the death of the settlor, there’s a deemed disposition of the assets that are in the trust and capital gains taxes cannot be – they can’t be set against the settlor’s capital losses or capital losses in the trust can’t be set against the settlor’s capital gains. Since the trust is, it’s an inter vivos trust which means during the lifetime of the settlor, gains will be subject to tax at the highest applicable marginal rate.

Natalia Angelini: And that’s a good point and I think essentially income earned in the trust will be taxed as if the settlor earned it personally during his or her lifetime. So even though the 21 year rule does not apply, the trust can make an election under the Income Tax Act not to have a deemed disposition on the death of the settlor. So if that election is made, the 21 year rule will apply and there won’t be a rollover with respect to transfer of assets into the trust. And I think there’s one other element to an alter ego trust that we should cover.

Chris Graham: Yes, residence is a basic general rule, residence of the trustee will determine the residence of the trust, I think that’s pretty much trite in most cases. However here’s where the kicker comes in. If the trustee becomes a non-resident, the trust will also be deemed, in many situations, to have also ceased to be a resident of Canada and must therefore pay the deemed disposition of its assets. Now why does that matter? Well who makes these trusts? People at least 65 years of age, with a fair bit of money. What do most of those people do in the winter? They pack their bags, they’re smart people, they avoid our winters. They go down to Florida. And therein lies the risk of being deemed to have become a non-resident. We’re not immigration lawyers, we’re far from being experts in legal requirements of residency and what deemed rules are and when they kick in.  But we do know there’s something out there and if you create one of these trusts or you certainly have to keep this in mind and get some highly qualified advice.

Natalia Angelini: Now I’d like to cover some of the reasons that you would want to set up an alter ego trust because this is a kind of trust instrument that is, in my view, appropriate for a narrower scope of people and not as broad an audience as some other trust vehicles. I think its best when you’re dealing with a really large estate because the best or what seems to be the best advantage to setting up an alter ego trust is avoiding probate tax. So if you’ve got a large estate and you’re potentially going to be paying significant sums in probate tax and those sums are .5% on the first $50,000.00 and 1.5% on the balance of the value of a person’s estate. So those numbers can really add up.

And one of the other great advantages of an alter ego trust is the privacy factor. The value of your assets are not made public. So if that’s important to you, then that’s one advantage of that vehicle. And something else that you can benefit from by creating an alter ego trust is creditor protection, because ownership of the asset is transferred to the trustee. However you’ve got to be careful because if it’s ultimately challenged and the purpose of the trust is found to have been set up to avoid or defeat creditors, then those assets can be clawed back and you won’t be able to protect them against creditors.

Chris Graham: Absolutely, Natalia. Federal and provincial statutes, for instance, the Fraudulent Conveyances Act contain lots of very powerful ways that creditors can go after debtors who tried or purported to enter into transactions for the sole purpose of protecting assets from claims. That’s something obviously you have to get expert advice on because it’s a case by case basis and the statutes are complex and there’s lots of case law and all the rest of it. But if you’re looking to create an alter ego trust to defraud creditors or whatever, that’s not something that they were really set up for.

Natalia Angelini: And I think one of the other advantages to setting up an alter ego trust is the prevention of litigation because it is more difficult to challenge the validity of an inter vivos trust than a Will, for instance. So that is something to be kept in mind.

Chris Graham: And one practical advantage of it, probably not really what this type of trust is designed to do, but if the settlor settles this trust, an alter ego trust, and then later becomes incapable, well that particular – the assets in the trust are self-administering. In other words, no one has to go to Court and initiate expensive and potentially contentious guardianship proceedings in order to deal with this property. You don’t have to worry about “oh my god, this person who’s been running this company is suddenly out of the picture, what do we do? Everything’s falling apart”. No, it’s taken care of, it’s in trust, there’s a trustee, these assets are well in hand and they’re also being managed in accordance with a plan laid down by the settlor already.

Natalia Angelini: So I can’t think of any other reasons for setting up a trust off the top of my head, so maybe we’ll move to reasons that you might not want to set up an alter ego trust.

Chris Graham: One of the major reasons not to, is that when you put something into an alter ego trust or any trust, you lose control of that asset, it no longer belongs to you.  And it never ceases to amaze me how many people who have set up estate freezes and what not, don’t appreciate that fundamental point. It is no longer theirs when it goes into trust, whatever it is.

Natalia Angelini: That’s right.  So you certainly have to be mindful of that and if, on the other hand, you do appoint yourself as trustee being the settlor, you can retain some control but you’ll forfeit your right to use the trust to reduce overall tax liabilities. So there’s a pro and con to proceeding in that way as well.

Chris Graham: This brings us back to what we were saying earlier about not being able to write off capital gains based on maybe the settlor’s capital losses on death. There’s also that aspect of tax planning, which is way beyond me.

Natalia Angelini: I’ll leave that one alone. So onto – another reason that you might hesitate to set up an alter ego trust is naturally there’s going to be legal costs and costs of obtaining tax advice.  For instance, ongoing administration expenses, trustee fees and the cost of annual tax returns that need to be filed. So those are just some of the costs built in that, you know, may not be – some people may not be interested in incurring.

Chris Graham: I thought people liked paying their lawyers, their accountants, their dentists.

Natalia Angelini: Yeah I don’t think –

Chris Graham: Their financial advisors.

Natalia Angelini: So I think we’ve covered the nuts and bolts of an alter ego trust meaning what it is, what its elements are, the advantages and disadvantages of setting one up. And they certainly are, you know, a welcome edition to the tools available to people in planning their estates, particularly for the older client. However, the advantages of confidentiality and probate tax savings definitely needs to be weighed against the tax considerations and potential tax disadvantages to setting up the trust.

Chris Graham: It is a state-of-the-art statutory trust and as such, contained in the Income Tax Act, and as such it has a broad variety of advantages and disadvantages.

Natalia Angelini: If you’re interested in learning more about this subject or just in reading more on it, then there’s a couple of great papers that we can refer you to. One is by Elena Hoffstein. It’s called Alter Ego Trusts and Joint Partner Trusts: Tips and Traps. And she presented this paper at the Fifth Annual Estates and Trusts Forum. And there’s also a more recent paper by Tim Yuden, called – and it contains an annotated alter ego trust and that was presented at the Taxation of Trusts and Estates:  A Practical Approach Seminar on March 3^rd, 2008. So those are two great sources that we’ve certainly referred to in putting on this subject today and we hope that they help you as well.

Chris Graham: It’s nice light reading, too.

Natalia Angelini: Nice light reading. So I think that brings us to the end of our discussion this week. Thanks for listening and thanks for joining me,Chris.

Chris Graham: That was a pleasure, Natalia. I look forward to podcasting with you again soon, as always.

Natalia Angelini: Me too! So perhaps one thing we can leave you with is we’d be happy to hear from you, so you can send us an e-mail at hull.lawyers @gmail.com. Or give us a call at our comment line being: 206-350-6636.

Alternatively, you can also visit our blog page at estatelaw.hullandhull.com where you’ll get even more information and discussion on today’s practice of estate law. I hope you enjoyed the show. I’m Natalia.

Chris Graham: And I’m Chris.

Natalia Angelini: And until next time, so long.

This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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As we all know, it is not uncommon for any investor to occasionally experience a substantial decrease in the value of one of the stocks in his or her portfolio.  But what if the investor is a trustee?   

In light of the recent amendments to the Trustee Act which appear to embrace the modern portfolio theory, it will be interesting to see how the Court will utilize this theory to assess a trustee's investment performance. Section 28 of the Trustee Act adopts an approach that is consistent with the modern portfolio theory.  Under this section, a trustee is insulated from liability if “the conduct of the trustee, which led to the loss from the trust, conformed to a plan or strategy, for the investment of the trust property, comprising reasonable assessments of risk and return that a prudent investor could adopt under comparable circumstances”.

Under the “statutory legal list” approach, which I described yesterday, a trustee was limited to investing trust assets in authorized investments.   However, with the development of the prudent investor rule, trustees are provided with a broader range of investment choices, which will likely increase their responsibility in determining an acceptable standard of care.

Presuming that a trustee is found liable for breaching the standard of care, section 29 of the Trustee Act permits a court to assess “the overall performance of the investments” when it is assessing damages.  Based on the language of section 29, it appears that a trustee may be allowed to offset the loss of a bad investment against the gain of a good investment.

The trusts and estates bar will be watching with interest to see how the judicial consideration of the prudent investor rule evolves.

Happy Super Bowl Weekend!  Go Patriots!

Rick

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In my blog yesterday, I introduced the prudent investor rule as the standard of care for trustees when investing assets that are held in a trust. Today, I will address how a trustee’s investment performance may be assessed.

Prior to July 1999, trustees were required to make investments pursuant to the “statutory legal list” provided for in the Trustee Act. This had the effect of holding trustees accountable for each particular investment, rather then the investment portfolio as a whole. The principle was further illuminated by the anti-netting rule, which stated that a trustee, who committed a breach of trust, was not entitled to set off a gain in one transaction against a loss in another. However, through recent amendments to the Trustee Act, the statutory legal list was repealed and replaced with the Prudent Investor Rule.

The Prudent Investor Rule reflects the modern portfolio approach to investments, the emphasis being on the prudence of the portfolio as a whole as opposed to each particular component. This theory is captured in Section 27(5) of the Trustee Act. Section 27(5) requires “a trustee to consider … the role that each investment plays within the overall trust portfolio”. Furthermore, under section 27(6) “a trustee is required to diversify the investments of the trust property. It appears that under the modern portfolio approach, a trustee would not be breaching the standard of care, should he or she invest a substantial amount of trust assets into a single security. As described above, section 27(6) requires that the trustee consider diversifying the portfolio, which is necessary if the Prudent Investor Rule is to be followed. To conclude my topic, tomorrow I will consider the liability of a trustee with respect to the investment of trust assets.

Thanks for reading,

Rick

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Not all Wills provide for an outright distribution to the beneficiaries. In some cases, the assets of an estate are held in trust over a period of time for the benefit of one or more beneficiaries, sometimes in succession.  When a trustee administers a trust, he or she is entrusted to act for the benefit of others. As such, our common law and statutes impose standards that trustees must comply with when dealing with trust property.

With the recent plummet in the stock market, I believe many trustees are considering how the stock market losses have affected the trust investments and what action they should take in the circumstances. 

Section 27 of the Trustee Act addresses the standard of care for trustees when investing assets held in a trust. Section 27(1) states, “in investing trust property, a trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments”. Section 27(2) states that “a trustee may invest trust property in any form of property in which a prudent investor might invest”.

Section 27(1) and (2) outlines the prudent investor rule. When investing trust assets, a trustee must comply with the prudent investor rule to protect himself or herself from liability.   Section 28 of the Trustee Act, emphasizes this point as it states that a Trustee will not be liable for losses arising from investments if the standard of the prudent investor is met. Nevertheless, the issue remains how does a trustee meet the “prudent investor” standard? In keeping with this theme, tomorrow I will address how a trustee’s investment performance may be assessed.

Thanks for reading, and have a great day!

Rick

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Checklists are wonderful things when it comes to the practice of law (list makers would argue that that is true in life as well). In today’s busy practice, a checklist can ease the troubled legal mind.

I was looking at several estate planning information checklists earlier this week. It is worthwhile to highlight some issues/items that can be easily overlooked but which a thorough solicitor should ensure is on his/her checklist:

·         If you are acting for both spouses/partners, advise the clients that you cannot act for one at a later date without the other’s knowledge;

·         Is the estate trustee to manage funds for minors and distribute monies to the guardian for care, maintenance and education of minor children. Who is the guardian;

·         If they can be transferred, who gets air mile/loyalty points. What about transferable equity in hunting/fishing lodges or sports clubs;

·         Joint Assets and the presumption of a resulting trust – is there a clear intention of ownership;

·         For foreign property, consider the necessity of executing a separate will or appointment of a local estate trustee;

·         Ensure every life interest is coupled with a remainder interest; and

·         Ensure any charitable organization named as beneficiary is still in existence and properly described.

Have a great weekend and for all those skiers out there, let it snow, let it snow, let it snow.

Justin

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Listen to Karkus v. Cotroneo 2007

This week on Hull on Estates, Paul Trudelle and Diane Vieira discuss the case of Karkus v. Cotroneo 2007. The case addresses many of the issues that estate lawyers face on a daily basis, such as: proving or disproving gifts, slander of title and the importance of corroborative evidence.

Karkus v. Cotroneo 2007 - Hull on Estates Podcast #93

Posted on January 15^th, 2008 by Hull & Hull LLP

Paul Trudelle: Hi and welcome to Hull on Estates.  You’re listening to Episode 93 on Tuesday, January 15^th, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

Paul Trudelle: I’m Paul Trudelle.

Diane Vieira:  I’m Diana Vieira.

Paul Trudelle:  Hi Diane.  How are you?

Diane Vieira:  I’m good.  How are you?

Paul Trudelle:  Very good.  This is our first podcast together and our first podcast of 2008, so I wish everyone a Happy New Year.  And why don’t we get into what we thought we would talk about today.

Diane Vieira:  Sure.  This is an interesting case that deals with a lot of things that we deal with in our practice.

Paul Trudelle:  Yeah, the case is Karkus and Cotroneo.  It’s a 2007 case, April 19, 2007, out of the Ontario Superior Court of Justice.  It’s a decision of the Honourable Mr. Justice Sheppard.  And I thought that it would be great to talk about this case because it deals with a number of issues that we deal with day in and day out.  It deals with issues such as gifts, proving a gift or disproving a gift, corroborative evidence required, remedies where there is a finding that there was no gift.  It talks about resulting trusts, set-offs, slander of title, costs regarding Certificates of Pending Litigation when those are resorted to early in the litigation, and also costs of the litigation.  So there’s a lot in this relatively short case…11 pages…but I thought we would spend a little time going through some of those issues.   Perhaps we can talk a bit about the background or the facts of the case.

Diane Vieira:  Oh, sure.  This is a case where the deceased died without a Will and her daughter was appointed the estate trustee.  The deceased was a business woman and near the end of her life, her business had been failing so there was a number of creditors.  And her daughter, the estate trustee, who is the plaintiff in this action, was looking through her mother’s financial records and an entry in her bank book showed a $65,000 transfer from her mother to her mother’s boyfriend, who’s the defendant in this case.

Paul Trudelle:  Right.  And I think just before we go on, I think the fact that the deceased was in some financial difficulty in her business, is an important factor that the Court relies on later on, so that’s important to note.

Diane Vieira:  Later on, the defendant admits that he received the $65,000.  His position is that this was a gift.  The daughter’s position is that this represents money that the defendant was holding on behalf of his mother.  A little more explanation to that was that the $65,000 the defendant used to purchase a property.  And then on that property, the defendant’s name is listed alone, but the property is listed as registered as being in trust.

Paul Trudelle:  That’s right.  And I think that’s important as well.  The Court deals with the resulting trust claim and looks at that factor, and we’ll talk about that briefly in a second.  So in essence the claim was by the estate for the return of the $65,000 and for a claim that the defendant held a property on a resulting trust and the estate had an interest in that property.  The Court looked at the evidence with respect to the gift and before doing that, set out the test that is required and what the estate must argue or try to establish in order to show that there was a debt or resulting trust and what the defendant needs to show in order to prove that there was in fact a gift.

Diane Vieira:  I just wanted to…another point of fact is where the $65,000 came from and when it was transferred.  The deceased had sold her house and she was moving in…she moved in with her boyfriend, who is the defendant.  And the $65,000 represents the proceeds of the estate…the proceeds of the sale of the house, excuse me.  And the money wasn’t gifted or transferred to the defendant until six or seven months later on, which is something that the Court reflected on.

Paul Trudelle:  That’s right. They looked at the fact that the parties had moved in together, the $65,000 was used to, in part, to purchase this house and make renovations that the plaintiff wanted.  The Court considered the fact that the onus is on the defendant to prove, or the recipient to prove that this was a gift, there was no presumption that would work in his favour.  And in fact, the presumptions which aren’t really referred to, would be the opposite, that there was a resulting trust or the money was owed back to the estate.  And the Court found ultimately that the defendant wasn’t successful in proving that this was a gift.  His evidence was that the money was used…was given to him to help with the purchase of the house and to pay for expenses and that was contrary to a finding of a gift.  Just another point on that - the Court refers to the evidence required in order to establish a claim by or against an estate and dealt with the issue of corroborative evidence.  Perhaps we can talk a bit about what corroborative evidence is required and what the rule is there.

Diana Vieira:  With respect to corroborative evidence, Section 13 of the Evidence Act requires that there be some corroboration of the material evidence.  And the onus is the civil litigation onus, but with corroboration.  And in this case, the judge and the Court had problems with the defendant and the plaintiff’s evidence.  He called that evidence unreliable.

Paul Trudelle:  Right.  He felt that the evidence of the parties was of questionable credibility and in the absence of any corroborative evidence, he wasn’t able to find that there was in fact a gift.  And as you mentioned, the Court referred to the burden on the defendant to prove it but said that there was also what he said was a healthy scepticism in addition to that.  Now there’s other cases that talk about whether there’s a higher burden on a party.  The burden is still the civil burden but the Courts will look at these claims with some scepticism.

So the result of the defendant’s failure to prove that it was a gift meant that money was owing to the estate.  The Court went on to deal with the issue of whether the estate had a trust claim against the defendant.  And the Court dismissed the trust claim for a number of reasons.  The first reason, or one of the reasons was that in establishing a trust, there is case law to the effect that evidence of an illegal scheme will not be received to support a resulting trust.  And the illegal scheme that the Court referred to here was the fact that the monies were transferred by the deceased to the plaintiff probably for the purpose of avoiding creditors.  And as a result, they had…the Court had a difficult time in finding that the estate could rely on the doctrine of resulting trust in these circumstances.   So how did the Court deal with the money owing to the estate then?

Diane Vieira:  The Court goes on to find that the defendant does owe money to the estate.  It’s a debt to the estate.  And he then goes on to discuss the concept of unjust enrichment.

Paul Trudelle:  Yeah, and the Court found that the money was owing to the estate and I guess the defendant had assets here.  The Court felt that it wasn’t necessary, in fact, to rely on the concept of trust or impose a trust over the property owned by the defendant.  A judgment, a monetary judgment, was sufficient.  You mentioned the unjust enrichment part of it and the Court talked a bit there about when they will find unjust enrichment in order to bring in the equitable remedy.

Diane Vieira:  Yes, the Court refers to the Supreme Court of Canada case, Peter vs. Bellow and the three steps that are needed for a finding of unjust enrichment.  And all three were here in this case.  There was an enrichment on behalf of the defendant receiving the $65,000 and a corresponding deprivation to the deceased, now the estate of the deceased, and then an absence for the reason of this enrichment.

Paul Trudelle:  Yeah, but having found all of those circumstances present, the Court still goes on to say that they won’t impose the equitable remedy of a constructive trust.  The Court refers to that Supreme Court of Canada decision and extracts a point to the effect that a monetary award would be the appropriate remedy in many cases, and that was the case here.  And the Court concludes that a monetary award is appropriate and makes an Order that the defendant pay back the $65,000 to the estate.  However, he doesn’t end there.

Diane Vieira:  No, it’s…the Court goes on to find that the estate is not entitled to that full $65,000 because the defendant did provide something in the excess of $20,000 in renovations to the house.  And if the deceased’s $65,000 was in a gift to the defendant, then the money that he contributed to the relationship was also not a gift. 

Paul Trudelle:  That’s right.  So in effect, they awarded the defendant…they made an award in favour of the defendant with respect to his Counterclaim for money that he said he spent on behalf of the plaintiff, and that reduced the recovery by the estate.  There is also the issue of a claim by the defendant for slander of title.  The defendant alleged that a Certificate of Pending Litigation put on his property was slander of title, and the Court dealt with that in very short order.

Diane Vieira:  Yes, the Court found that the plaintiffs did not…didn’t have a credible position to have had that Certificate of Pending Litigation registered.  And consequently they awarded the money that the defendant had spent on removing that Certificate, credited back to the defendant.

Paul Trudelle:  That’s right.  And finally, on the issue of costs of the action itself, the Court considered the fact that the plaintiff had some success, made recovery for the estate.  However, it didn’t establish its claim for resulting trust.  The Court also felt that the evidence of the witnesses was unreliable to a certain extent and in fact in some parts the judge said that in some parts, the evidence was fabricated.  And as a consequence of that he ordered that there be no order as to costs, and each party had to bear its own costs.

Well, I think that’s an interesting case on a number of grounds.  We’ve touched on a few of the points that the case deals with.  I recommend the case highly to anyone dealing with those types of situations where there are gifts, where you’re considering a claim for a resulting trust, an interesting counterclaim where you’re faced with a claim for the return of a gift or money advanced on the basis of benefits provided to the deceased, and also considerations for dealing with Certificates of Pending Litigation and the costs that may be involved in that.

Well thank you very much, Diane.

Diane Vieira:  Thanks Paul.

This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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Yesterday, I blogged on the case of Gubo Estate v. Cotroneo. There, the estate was granted judgment against the Defendant for the recovery of an alleged “gift” that the court determined was unsubstantiated, and therefore repayable.

Interestingly, the judgment was not for the full amount of the gift. The Defendant alleged that he had paid out approximately $22,500 on behalf of the deceased, and that this amounted to a debt in his favour. The Court accepted this, without much discussion, and reduced the amount repayable to the Estate by $22,500.

The Court heard from the Defendant that the deceased had made a gift of the funds to him, and that the Defendant had made various expenditures on behalf of the deceased. The Court did not accept that the transfer from the deceased to the Defendant was a gift. However, the flip side of this was that the expenditures by the Defendant for the deceased were not gifts, either: hence, the reduction of the judgment in favour of the Estate.

In dealing with the case of an alleged gift, counsel should always consider the bigger picture: if the gift fails, is there a basis for a counterclaim by the defendant for advances from the defendant to the deceased, or on the basis of quantum meruit?

Thank you for reading,

Paul Trudelle

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In the recent case of Gubo Estate v. Cotroneo, the Court considered a claim on behalf of an estate for the recovery of funds advanced by the deceased to her boyfriend.

The deceased had sold her home and had given the proceeds of sale, being $65,000, to her boyfriend, and then moved into his home.

The Court found that there was insufficient evidence to establish that the advance was a gift. 

As to a remedy, the Court heard evidence that the advance was likely for the purpose of defeating creditors of the deceased. As such, the Court declined to apply the doctrine of resulting trusts, applying a Court of Appeal statement to the effect that "evidence of an illegal scheme will not be received to support a resulting trust."

However, the Court found that it was not necessary to rely on the doctrine of resulting trusts. The Court found that it was able to make a monetary award, and granted judgment in favour of the deceased’s estate.

In advancing a claim on behalf of an estate, the imposition of a trust is not always necessary, and a monetary award will often be the most appropriate remedy.

Have a great day,

Paul Trudelle

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Pet Trust Funds - Hull on Estates Podcast #76

Posted on September 11^th, 2007 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estates. You’re listening to Episode #76 of our podcast on Tuesday, September 11^th, 2007.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.  Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills. Now, here are today’s hosts.

Ian Hull: Hello Suzana.

Suzana Popovic-Montag: Hi there, Ian. How are you?

Ian Hull: Just great.

Suzana Popovic-Montag: That’s good.

Ian Hull: Great to be on Hull on Estates. One of the things I tried to do this summer was catch up on the podcasts over the year that I had missed. And enjoyed listening to a bunch of the Hull on Estates earlier ones to catch up a little bit on my continuing legal education. So that was kind of fun.

But today we want to sort of turn our focus on a couple of things which we find in our other podcast, Hull on Estates and Succession Planning, we do much more of. And that is sort of look at some real world and what’s the real world doing in estates. And we are always struck by the fact that the practice of law in the area of estates, whether it’s contentious or non-contentious, touches the different parts of our lives in so many ways. And I had the privilege of being interviewed by the Globe & Mail last week…not last week, I guess it was a couple of weeks ago now. In August 30^th, there was an article about what I thought was sort of a fun topic and that was the gifting of substantial gifts to animals. So why don’t we spend a couple of minutes just talking about that, ‘cause that was kind of a neat twist on estate planning that came out of New York City.

Suzana Popovic-Montag: It is an interesting twist, as you say Ian, and it’s one that we’re seeing more and more of, surprisingly. These pet trust funds and a very interesting concept. And, you know, in today’s day and age, I think we’ll see even more of it.

Ian Hull: Well, the article that we’re talking about is an article about the late Leona Helmsley who was a very wealthy woman and managed to accumulate a lot of money over her days and she left $12,000,000 in a trust for her dog. I was asked by the Globe & Mail what my impression of that was and I bluntly said that’s a lot of dough for a dog. But more importantly…

Suzana Popovic-Montag: You got quoted on that exact comment.

Ian Hull: …I did get quoted on that, that’s right. I did get that quoted. But more importantly, I just think it was an interesting dialogue that we had. There was a couple of other…Michael Sullivan, who’s the President of the…essentially the overriding…it’s not the Humane Society, but I’ll check his exact title here, but it’s…and McCray, a great lawyer from out in Vancouver, was also…Bill MacRae was also interviewed. But, you know, the twist was this. I thought it was interesting is that this brings a unique situation obviously, but it brings the issue of estates alive and in person, so to speak, and brings it to the front of what every day-to-day people see and think about and it goes to the glamorous side of estates. 

But Michael Sullivan is the head of the SPCA in Canada, had a great sort of view on it and admitted…and the article talks about the fact that people are using pet trusts more and more. And so the idea of a pet trust is, this is sort of an extreme example putting $12,000,000 in, but the idea of a pet trust is something that we can add to our arsenal of options we want to put to our clients. Because as was noted in the article, an elderly person who may have got real fond affection for their animal, a dog or a cat, may be one of the main things in their lives because they may be a bit lonely or people aren’t around as much to spend time socially with. The succession of the animal itself can be a really, really important factor in the estate plan.

Suzana Popovic-Montag: No, I think it’s really a product of our day, our generation, and I’m not surprised that it has come to that level. And I think we’ll see, as I said earlier, a lot more of these kinds of trusts and these kinds of plans being put into people’s estates.

Ian Hull: So we want to just add that to our checklist and make sure that we’ve canvassed it with our clients. Not all of them will have $12,000,000 bucks to throw around but nonetheless.

We’ve got a couple of cases we just want to make a comment on as well today, on this podcast. But before we go to that, one of the sort of underlying themes of Hull & Hull in the past year or so has been to develop and work with this whole new social media world. And in so doing, we’ve experimented with podcasting, we’ve experimented with blogging, but we’ve also had the chance to meet really great people in the new social media environment. And one of those great people is Joseph Thornley. And Joe is President of Thornley Fallis, a Public Relations firm that operates out of Toronto and Ottawa. And Suzana and I were privileged enough to be interviewed for an article that was published in the Ottawa Business Journal last…I guess it was published on August 31. It’s available on-line. But it was a fascinating sort of discussion that we had about where social media is going and what our firm has been doing with it and other firms like ours to enhance our market position, but also to spread the message of the importance of social media.

Joe really prodded us and, you know, forced us to consider what is it that, as a boutique estate litigation firm, that made the social media, the blogging and podcasting, something that we would want to sort of step into and pour our time and resources into.

Suzana Popovic-Montag: And one of the neat comments that you made in that article was the fact that we’re…and Joe picked up on this as well…that, you know, suddenly businesses are using social media in a different way, in a social environment, in a non-traditional fashion. And I think it’s been really interesting to see. Certainly our experience has seen us use it in a different fashion than we would have ever expected and yet it seems to be working.

Ian Hull: And we, you know, sort of just to give people an understanding. I mean this is, it is working. We’ve been out doing this for about a year now. Our stats are, what we consider to be, just terrific. We get literally thousands of hits on our blogs in a month, we get hundreds and hundreds of downloads of the podcasts.  And we think that it’s being downloaded and blogs are being read by people who are specifically interested in what we do. And so that’s very rewarding as well.

Suzana Popovic-Montag: And that was a neat comment that Joe himself made in the article, the fact that, you know, it’s a very narrow focused marketing. And it’s a little bit different from the traditional way where you just sort of advertise and hope that it’ll hit or stick on someone. Whereas here we’re just picking a niche and we’re really focusing on that and hopefully it’s doing a general service to everyone.

Ian Hull: So, just to wrap up.  One of the things we, you and I Suzana, get to have the privilege of doing next week or is it the week after, I forget now. But coming up soon, we’ve got a couple of interesting events that we’re going to be participating in. One is we are speaking at the Windsor Estate Planning Council about succession planning issues and estate planning and trying to factor in more than just the conventional thinking inside the box. Think outside the box a little bit, like we talked about a pet trust. Think about, you know, involving the family. Think about other unique twists and turns on making an estate plan work. And so we’re really looking forward to going down to Windsor and speaking to that group. And then Suzana, I know you’re speaking to the Ontario Bar Association a week or so later, to talk about just this point of niche marketing and niche positioning yourself in ways, of using creative ways and creative tools, with the Ontario Bar Association.

Suzana Popovic-Montag: I’m definitely looking forward to that one.

Ian Hull: So just as a sort of added little academic wing to the discussion today, I just wanted to talk about two cases briefly. Both recently decided. One is the Mernick and Mernick decision. And it came out in 2007. It’s actually just been published in the ETRs in the August edition of the Estates and Trusts Reports, at Volume 32. And the Mernick decision itself is at page 288. It’s an interesting case and really what I wanted to comment on was more about the process as opposed to the decision itself. What happened in Mernick and Mernick is, is that there was an interesting dovetailing between the Ontario Superior Court’s jurisdiction and a religious court Order.   And how that religious court Order was to be applied and how it impacted on us, on the parties outside of the religious sphere. It was a Rabbinical Court and they…without getting too much into the details, the family, two brothers, were disputing over an estate. They went outside of the Court system, so to speak, went into the religious court to resolve the problem. They resolved it and then for enforcement purposes, they had to eventually come into the Superior Court. And why I think it’s an important case is….well there’s lots of interesting cases. They talk about how the summary judgment was effected in this case and so on. But what I thought was interesting to me was how again the different worlds in a sense collide and how they work together. And more and more often, we’re seeing the role of a religious court in resolving disputes in estates is happening. I’ve participated in some of these hearings and these types of scenarios myself and I just think this Mernick and Mernick decision is a helpful decision. And take a quick look at it if you’re interested in seeing how this twist of the two jurisdictions work themselves through.

The other decision I just thought I’d point out was, and I don’t want to harp on the whole question of joint accounts endlessly. But the Nova Scotia Court of Appeal, in the Comeau decision, reported again in the same ETRs at page 216, came out with a great summary of a joint account dispute between parent and child. The deceased died intestate, survived by 10 kids and the whole question was, was the joint account for the kids surviving or was it for the 10 kids, ‘cause it was an intestacy? And what I liked about this case was it went to the Court of Appeal. Two things that I thought were helpful, because these cases are popping up so often in our practices. Number one is that it carefully reviewed the whole trial court decision process and how a court will analyze this question of joint accounts. So that if you have to roll your sleeves up and get into a fight over a joint account, you look at this decision and it talks about what were the bullet points, what were the important steps in the game to…that the court thought were important at the trial level. And so that’s good to know because again, we’re always trying to either propound or to dispute the joint ownership issue, and it depends on what side you’re on. But the second part I thought was helpful about this decision was that it then took us to that next analysis. And that was, what is an Appeal Court going to do with a carefully reasoned, properly analyzed joint account case? And in this case, they held that there was no grounds for appeal and the appeal was dismissed. But the way that the Court does it…is again, it’s one of these cases that it’s not a seminal case. It doesn’t say things that we haven’t heard before. But too often we read these cases looking for the newest word on something. But this case shows us how to, from a practical standpoint, work through and build a case on a joint account facts. And then how to deal with it at the appeal level, on both sides. So it didn’t matter whose side you were on in this one. You can learn what the Courts were looking for, the kinds of trends they’re looking for and the kinds of approaches that worked in this case. Because the facts again tie into the simple, you know, who owns on the account on death question. 

But those are just two decisions I thought were kind of fun and worth looking at from an academic standpoint. And also from a practical standpoint.

Suzana Popovic-Montag:  Well, that’s great Ian. Thank you very much for that. And we’ll speak soon.

Ian Hull: Great, thanks a lot Suzana.

This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.